Israeli Prime Minister Benjamin Netanyahu says he has ordered a plan to be prepared for organising a "bypass economy" that could help Israel work around potential economic sanctions, naming blockchain as one option for the task. He made the comments in an October 23 interview with Channel 10's Roi Katz.

A "bypass economy" in the works

Asked how worried he was about economic sanctions against Israel, Netanyahu said he was, and that banking sanctions were possible. He then pointed to "the currencies that get around this" and said he was working on the issue as well.

"You need to organise a bypass economy."

— Benjamin Netanyahu, remarks to Channel 10, translated from Hebrew

When Katz asked whether blockchain was the alternative he had in mind, Netanyahu answered, "one of them, certainly," and said he had already asked for a plan to be prepared. Channel 10's report does not name a token, network, operator or timeline.

The idea is a contingency for keeping trade and payments running if banking access narrows: sanctions against banks typically work by cutting institutions off from the correspondent relationships and cross-border settlement channels that international payments depend on.

Netanyahu also told Katz that Israel should not expect to keep receiving U.S. defence aid on the scale of the tens of billions of dollars it has received before, because America has changed. Under a 2016 ten-year memorandum of understanding, U.S. defence aid to Israel currently runs at $3.8 billion a year.

What Britain has announced

Britain's latest measure is narrow, and the interview did not connect Netanyahu's remarks to it. On October 19, UK Foreign Secretary Ed Miliband said Britain had created new powers to sanction individuals and companies involved in building settlements such as E1 — a planned development east of Jerusalem — which the UK government describes as illegal, and urged businesses not to bid in the tender.

Miliband also restated plans for legislation banning goods from settlements and for "action on services that finance or facilitate them." That is the finance-related part of the UK's approach, and it targets settlement activity, not Israel's banking system.

Who can stop a crypto payment

A blockchain can move tokens without a bank, but the points where money enters and leaves still answer to regulators. The U.S. Treasury's Office of Foreign Assets Control (OFAC) says sanctions obligations for people under its jurisdiction are the same whether a payment is made in digital currency or traditional money.

Circle's USDC terms let the company block addresses and act on valid government orders, and conversions into bank money require identity checks even in regulated markets, as with European Economic Area holders redeeming USDC through Circle's French entity.

Russia offers a recent example of crypto rails under sanctions pressure. After law enforcement shut down the Russian exchange Garantex in March 2025 — which had been under U.S. sanctions since 2022 — Tether froze about $28 million in USDT belonging to its customers, according to blockchain analytics firm Elliptic. In August 2025, OFAC sanctioned the issuer of A7A5, a ruble-backed stablecoin used for cross-border payments, along with Grinex, the exchange set up by Garantex's operators. Elliptic warns that businesses with even indirect exposure to the token can face sanctions risk. Israel is not under the kind of broad sanctions regime Russia faces, but the case shows where crypto payments can be cut off.

Where the Bank of Israel fits

Netanyahu did not say who would draw up the plan. The Bank of Israel already runs a digital-shekel project — a central bank digital currency the bank has been studying as a potential retail means of payment alongside cash and commercial bank money — though nothing in Channel 10's report links it to his request. Elsewhere in the interview, Netanyahu said he "unequivocally" disagrees with Governor Amir Yaron's warnings about the growing defence budget, and defended an additional NIS 400 billion for defence over the coming years.

What to watch

• Who owns the plan: whether the Finance Ministry, the Bank of Israel or another body is tasked with preparing it.
• What it is for: a general backup if payment channels are disrupted, or a response to targeted measures such as Britain's.
• The UK's next step: how far its planned action on settlement-financing services reaches into banking.

This article is provided for informational purposes only and does not constitute legal, financial or investment advice.